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Do you think it is a good idea to help a loved one consolidate debt by lending them money?

This is actually a very hard question to answer. If you really cared about the person asking for money, your immediate response would be to say yes and allow them to borrow from you. However, if you let your head rule over your heart, you would be inclined to say no.

According to a survey, 8 out of 10 Americans will not lead a family or friend some money to start a business. If these people are unwilling to finance a business, what more if the money is intended to be used to consolidate debt? A business has the potential to pay back what is borrowed. Debt, on the other hand, is not as promising. In fact, it shows evidence that the borrower may be irresponsible with the way they handle their finances. If the latter is true, would you really trust that person with your money? What makes you think that they will act responsibly with their money this time?

Why a family loan for debt consolidation can be dangerous

There are many reasons why a family loan is highly discouraged. Even if it will help a loved one consolidate debt, you need to think twice before you agree to help them. Here are three reasons why using a family loan to finance a debt consolidation strategy is not a good idea.

You are not helping them get to the root of the problem

First of all, you are not really helping by providing the funds to pay off the debt. You need to get to the root cause of the problem. Otherwise, your loved one might make the same mistake again and end up landing in debt once more. When done correctly, consolidating multiple debts will do more than just help you get out of debt. It can also make sure that you learn the financial habits that will allow you to stay out of debt. Do not give your loved one an easy way out by providing them with the easy money to consolidate debt. They need to learn how hard it is to pay off debt – that way, they will be motivated to be smarter when they borrow money.

You are endangering your own finances

Another reason why you should not agree to a family loan is that you will only endanger your own finances. It does not matter who is borrowing from you. When you lend money to someone, there is always a chance that they will not pay you back. If you allow them to borrow from you, it is important for you to consider the consequences of not being paid. Will it compromise your financial security? If it will, then that should be more than enough reason for you to say “no” to the person borrowing from you. It will not make sense to save someone’s finances if it will leave your own vulnerable.

You are putting your relationship at risk

This is probably the most important reason to avoid a family loan – you will put the relationship at risk. Money fights are not uncommon among family members. In fact, a survey revealed that siblings have conflicts over money. We also know that this is a huge cause of stress between couples. If you want to preserve your relationship, it is better to just say “no” to that person who is borrowing from you. This will help you avoid any feelings of resentment when that person ends up not paying you back.

Of course, you may be thinking, saying “no” can also destroy your relationship. The person asking help from you will feel resentment because they will feel like you abandoned them in their time of need.

The truth is, you are not encouraged to give a family loan to help consolidate debt. But that does not mean you will not help. You can still provide help and it does not even have to involve money.

How to help loved ones consolidate debt

There are three ways for you to help a loved one struggling with debt. This might even be more beneficial than lending them the money that they need.

Educate them on what they should do

One way to help is to give them debt consolidation lessons. Even if you do not know a thing, you can learn with them. Find out what the options are and help enlighten them of the best choice based on what they can afford. You might want to look beyond the options to consolidate debt. You can also look at their financial situation and identify areas that they can improve. If they do not have a budget plan, you can help them create one. Point out mistakes that might compromise their ability to completely pay off their debts.

Teach them the right financial habits

Giving them a list of the financial habits they can learn is also another thing that you can help them with. If they think that you have the money to lend them, that means you are good enough in managing your finances that you ended up with extra money in the bank. Teach them how to accomplish that. Give them tips on how you manage your money and that might be the key to help them avoid too much debt in the future.

Give them emotional support and encouragement

Finally, you can simply give them your emotional support. Believe it or not, this can go a long way. Be the voice of reason in their life. Work closely with them as they pay off their debts, making sure that the right decisions are being made. When they are feeling discouraged, give them the motivation that they need to keep going. Remind them of why they need to keep on paying and stop them when they are about to make things worse. As you go through every step with them, it can possibly bring the two of you closer. That is more valuable than the money that you could have lent them to consolidate debt.

Debt consolidation before marriage might not be the sexiest topics to talk about with your loved one. After all, debt is not really something that you want to associate with your big day. In between the venue selection, food provider, and your long guest list, consolidating your debt payments might not be a top priority. However, your finances is an important aspect of your relationship – so any debt that you individually owe deserves both of your time and attention. If you want to start on a clean slate, you might want to sit down and discuss what you will do with the multiple debts that you owe.

As Pew Research shares, almost half of adults in the country are married. Unfortunately, not all of them stay married. Most of the time, one of the reasons why couples fall apart is because of financial issues. This is why you need to make sure you eliminate issues that might come in between you and your future spouse. The better start you have, the longer your relationship can last.

Part of this is making sure that you have the finances all figured out to pay for wedding expenses. The total wedding cost can be quite an amount. The cost of the venue and suppliers can make a big dent in your savings. You also need to look ahead and make sure that you have money matters figured out when you start living under one roof.

This is where debt consolidation before marriage comes in to help you manage your finances better. To ensure that you understand this debt relief option, here are the pros and cons of consolidating your debts before you tie the knot.

Why you should consolidate debt before getting married

Here are some of the benefits you can expect from a debt consolidation program.

You put some order into paying down your debts

Sometimes, having a structured repayment plan is all it takes to be serious about your debts. If you are heading into marriage with multiple debt accounts under your name, it can take its toll on you in so many levels. One of the best ways to manage this is to consolidate your payments under one account. This way, you can monitor your accounts better and be in better control of your monthly payments. You free up time to focus on wedding details and make it one of the best days of your life.

You start improving your credit score

Your credit score can affect the financial opportunities that you can grab with your spouse. This is why you want to put everything in order before you exchange your vows. It is not enough that you take a look at your credit report and manage errors that may exist. One of the best ways to improve your score is to make your payments on time every time. Consolidating your debts can give you better control over your payments. You might be planning to take out a mortgage loan after the wedding and a high credit score will help you get the best deal out of the loan.

You get to budget better for wedding expenses

Debt consolidation before marriage can help you and your partner see your expenses clearly. This will help you budget for your wedding better.

Putting together your wedding expenses can be a mix of a lot of different things especially when you plot out where you will get the money to pay for it. If you have enough savings to pay for everything in cash, then good. However, if you will resort to using your credit cards or even borrowing money from different sources, you need to know how much you can afford to pay back every month. Consolidating your debts can give you a better view of your finances especially how much you can allocate to pay back wedding expenses.

Possible pitfalls of debt consolidation before marriage

Debt consolidation before marriage can also bring in its own share of problems to the relationship. Here are some of them worth looking into.

However, if you consolidated your individual debts separately, it should not be a problem at all. If you really want to be sure that everything will work out, consolidate your own debts and your partner should do the same for their own list.

Missing payments because of a false sense of debt freedom

Another disadvantage of using debt consolidation before getting married is the chance that you fall under a false sense of debt freedom. Having this feeling while you are in the midst of spending for your wedding can be dangerous. It might make you more confident to use credit once more to pay for everything.

You have to remember that debt consolidation is only a repayment tool. It changes the payment structure of your debts. Although you paid off your multiple debts, the actual balance is just transferred into another one. You still owe the same amount of money. As long as you keep that in mind, you should be cautious enough to keep your spending minimal.

If you are already running on a shoestring budget, the upcoming holiday expense might tip you over the edge. One wrong move and you might not be able to enjoy the holidays altogether. This makes it all the more important to tread lightly and choose your next financial move.

What you want to do is to make sure that you can free up some money from your existing budget. If you can cut back on some of your expenses, the extra money can be used to pay for your holiday-related expenses. If you look hard enough, you will find areas where you can save money. Even with your debt payments. If you understand the real debt consolidation benefits, you will know that it can be used to help you lower your monthly debt payments.

What debt consolidation benefits do you get?

Debt consolidation can help you manage your finances better as the year comes to a close. More than anything, that is the most important lesson that you need to learn while you are trying to get yourself out of debt. But apart from that, there are other debt consolidation benefits that you can also enjoy. Here are just a few of the benefits you can expect when you consolidate your debts.

You get to focus on a single payment

Part of the problem when you have so many debt obligations is that you sometimes overlook some payment deadlines. Once this happens, it automatically gives your lenders the right to start charging you for penalties and other fees. This will lead to a spike in your succeeding payments and puts you further back the red line.

One of the debt consolidation benefits that you will enjoy is having all your debts under one account. This way, you only have to worry about one payment every month. On top of that, you only have one interest rate and one due date to keep in mind. This will help drastically reduce the chances of forgetting a payment due date.

You reduce financial stress

Financial stress and anxiety always come from things we cannot control. This happens when debt takes over your finances and you are left fo simply react. You are left to just wait what your total bill will be every month all while trying to figure out if you can make that payment or not. This incessant thought can bring you unnecessary financial stress.

But if you can simplify your debt payments through consolidation, it becomes less of a burden already. This is one of the debt consolidation benefits that you need to take advantage of for the coming holidays.

Collection calls can be put on hold

If some of the debts that you consolidated are already in collections, the only way to make the harassing calls stop is by paying them off. If you do not have the money to do that, borrow a loan that you can use to consolidate your debts.

This will bring you great relief especially as the holidays are fast approaching. These calls can put you in a constant state of fear and stress. You never know what time of day your phone will ring and the stress in knowing you have outstanding obligations can be a big burden.

How do you get started with it?

Now that you know the debt consolidation benefits that can prove to be useful during the holidays, it is time for you to find out how you can tap into that. There are a couple of things that you can do.

Look for professional help

While DIY debt consolidation can work, it is not for everyone. The thing is, admitting to yourself that you have debt issues is hard. It is harder if you have to admit it to someone else. The humiliation is sometimes one of the reasons why some people force themselves to consolidate debts on their own. But the truth is, you do not have to feel ashamed. There are millions of Americans in your position and having debt is not uncommon.

Not only that, keeping the debt relief efforts to yourself is not always a wise thing to do. If you do not know what you are doing, you might end up making things worse. So just look for a reliable debt relief company that has a track record of helping consumers get out of debt. The sooner you do it, the faster you can achieve debt freedom.

Use a zero percent card

Another option that you can use is a 0% interest balance transfer card. This is like a credit card that is offered with a 0% interest. That means you will not be asked to pay the interest as long as you are still within the introductory promo period. You can transfer multiple debts here and benefit from paying only the principal amount.

A balance transfer card is an effective way to consolidate debts and save money. But you have to make sure that you know how to maximize the debt consolidation benefits that you can get from it. Make sure you can pay off your debts (or at least a significant part of it) before the promo period ends. If you know how to work it to your advantage, you will find yourself able to manage your debts well – making your holidays a more positive one.